Dear Sir / Madam, I had bought a house in Thane in 2002, and have sold it less than six months ago. I had purchased an under construction house in Navi Mumbai in 2012, for which possession was taken in 2017 and for which I had taken a bank loan, which is currently being returned through monthly EMIs. I have invested in an under-construction flat in Pune, after paying the booking amount in November, 2017. I have been told by a CA that after taking into account price indexation, I will have to invest in bonds to save CGT on sale of Thane house. Kindly advise if the money gained from sale of Thane house can be used to pay up remaining loan of Navi Mumbai house; or if it can be invested in a Capital Gains Saving account and used to pay future instalments of Pune house? If neither of these options is allowed, do I have to compulsorily invest in bonds to save CGT? Thank you.
Hi,
Capital gain exemption can be claimed only for buying/constricting a house u/s 54. You cannot get capital gain exemption by using the money to pay off housing loan.
So, if you want to save Capital Gains tax, then invest the Gain amount up to Rs. 50 Lakhs in Capital Gains Bond. You can use remaining amount to pay off the loan.
Alternatively, you can pay the Capital Gain tax and then use all the remaining amount to pay off the Loan.
Or, you can use a combination of both the above options
you can get exemption only if you invest either in bonds or second house (i.e Pune) and not for repayment of housing loan. If the entire capital gain is not invested in purchase of pune house before filing of ITR for the F.Y. 2017-18 then you need to open an CGAS and deposit the amount in that account. Utilise the amount within 2 or 3 years of the date of transfer.
Suppose I own two homes. I sell one of them. Can I save tax by reinvesting the capital gain to buy another house ?
Investment in bond is to be done to save capital gain tax arising from sale transaction.
if you wish to pay tax ,no need to invest in bonds .just pay tax and you are free to use the funds way you like.
Yes
Hi,
You will not get any exemption for repaying existing home loans.
To save taxes, you can invest in capital gains bonds or invest in the new house in Pune.
Hope that clarifies.
Regards,
Nikhil.
To your second question, the answer is yes.
Thats how you can save taxes.
Thans. I paid the booking amount for pune house on 14 Nov 17 (under construction property). I sold the Thane house on 21 Nov. 2017. So, booking amount for buying pune house was paid a week before sale of Thane house. Will I still get tax exemption by investing in pune house? Thanks.
Pune house is under construction as you told earlier. You can claim exemption but construction should be completed within 3 years from the date of transfer of thane house (i.e. 21.11.2017).
Yes but ths condition for under construction house is that the construction should be completed within 3 years from the date of transfer of the first flat.
Please ensure that and then it should be fine.
As discussed, it is litigavtie to claim exemption u/s 54 when you buy an under-construction house before selling the property.
In you case, since you have paid the booking amount before selling the house and got the allotment letter before selling the house, you may face issues if you claim exemption.
Safest option is to buy bonds.
Buying one year prior to sale applies for ready to occupy house. So, you can't claim exemption for any of the scenarios mentioned by you. However, if you sell one of the houses, then you can claim Section 54 Deduction either buy another house within 2 years or construct another house within 3 years.
I would suggest going for Capital Gain Bonds for saving tax here and reduce your Loan liability by using Balance amount to prepay the Loan
Yes you can claim the exemption for the same.
Already discussed in the other question, if allotment of new property is made after sale of old property, there is no doubt in allowability of exemption.
